Diabetes results from an absolute or relative deficiency in functional pancreatic beta-cell mass. Over the past few years, there has been renewed interest in the role of insulin itself in the regulation of beta-cell fate. Numerous animal models point to a critical role for beta-cell insulin signaling in the survival and proliferation of pancreatic beta-cells. In the present article, we review new studies that elucidate the mechanism by which insulin exerts anti-apoptotic and pro-mitogenic effects on beta-cells. In particular, we highlight the emerging role for Raf-1 kinase in autocrine insulin signaling and beta-cell fate decisions. We also discuss provocative evidence that the relationship between the dose of insulin and the birth and death of beta-cells is not linear. We propose a new hypothesis based on these findings, called the 'sweet spot' hypothesis, that can explain how both upward and downward deviations from normal levels of autocrine/paracrine insulin signaling might play an important role in the pathogenesis of type 1 diabetes and type 2 diabetes. We also highlight the key experiments that are required to further test this hypothesis.